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By Jonathan Randles 

The developer of Unlockd, a mobile app that sends targeted ads to users when they open their smartphones, has filed for bankruptcy in New York as it hunts for financiers to fund litigation against Google, which the startup blames for its demise.

The Australian-based tech startup has accused Alphabet Inc.'s Google of flexing its dominance to kill a potential competitor in the mobile advertising market. Unlockd's U.S. subsidiaries filed for chapter 11 protection Friday in the U.S. Bankruptcy Court in New York. The company also has filed for the equivalent of chapter 11 protection in Australia and the U.K.

Founded in 2014, Unlockd's business model offered an alternative to Google. Users of Unlockd receive credits that can be redeemed for rewards in exchange for viewing targeted ads sent to their Android phones.

Before its dispute with Google, the company attracted significant investor interest. Among its backers was Lachlan Murdoch, executive co-chairman of News Corp, the owner of The Wall Street Journal.

The startup had been preparing an initial public offering in Australia for early 2018 with an anticipated valuation of between $180 million and $230 million, according to a report prepared by Australian administrators. But interest in Unlockd, the startup says, evaporated after Google threatened to remove the app from its Google Play store and Admob mobile advertising sales tool, saying the app violated its terms of service.

Unlockd responded by taking action in court and obtained preliminary injunctions in London and Australia that prevented Google from removing the app. Despite initial success in court, interest in the stock dried up because of the dispute with Google and the public offering was pulled, Unlockd co-founder Matthew Berriman said in a declaration filed in bankruptcy court.

"With no new infusion of capital, Unlockd found it difficult to finance its growing business, the search for an alternative to Google, and its lawsuits against Google," Mr. Berriman said. "In addition, the confidence of its trading partners eroded; as, the future looked uncertain."

A Google spokeswoman Monday said: "Our Google Play and AdMob policies clearly set out how our products may be used, and are designed to protect the interests of advertisers, publishers and users.

"We explained the issues to Unlockd, outlined how they could address the violations, and gave them time to make the necessary changes. Unlockd failed to abide by these polices. As we would with any developer, we enforced our policies."

In June, Unlockd entered administration -- a legal process similar to chapter 11 bankruptcy in the U.S. -- in Australia.

Administrators from the advisory firm McGrathNicol who are winding down Unlockd in Australia said earlier this month in a report to creditors they have conducted a "thorough process to seek litigation funding" but so far have been unable secure funding for any legal action against Google. The outcome of the dispute with Google "is currently unclear," the report said.

Mr. Berriman on Monday told The Wall Street Journal that Unlockd is finalizing funding options that would allow his company to "expose the truth" in open court.

The startup's two U.S. subsidiaries placed into chapter 11 are Unlockd Media Inc. and Unlockd Operations US Inc.

Judge James L. Garrity Jr. has been assigned to the bankruptcy case, number 1:18-bk-13248.

John D. McKinnon contributed to this article.

Write to Jonathan Randles at jonathan.randles@wsj.com

(END) Dow Jones Newswires

October 29, 2018 18:13 ET (22:13 GMT)

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